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I need about $1,000,000 to build a factory in Japan. Do I need to give away shares of my firm to get a business loan from angel investor? Can I just give away a percentage of the future profit?
If you can get someone to give you a million dollars for only a percentage in future profits, you are a better salesman than anyone I know!
That’s sorta risky for an investor. He gives you $1 Million. Then he has to wait till you build a factory, then get your business going, then start selling your product, then get profitable before seeing a dime! This could take years and you may never get profitable.
What happens in 4 years when you are about to get profitable, then you go out of business? Or you Sell the business? What does the investor get? There is no way any investor would agree to that.
Even a bank loan holds something as collateral. Though to actually build a factory, they would hold a lot more than buying an existing factory.
Now if you gave the investor equity in the company (part ownership in stock) and secured his investment with the equipment you are buying with his money, and gave him a split of the profits you may have a better shot!
You might now be thinking: No Way! That’s too much!
Well, I guess it goes back to the Golden rule: He who has the Gold, rules.
I hear all the time from investors speaking at my venture capital events that the money is out there, you just have to be reasonable in your negotiations in order to get it. Having a great product and an amazing management team helps too!
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